Federal Reserve Policies Drive Up Gas Prices Written
(The New American) -- by Daniel Sayani --
As inflation continues to rear its ugly head, one of the most pressing and ominous side effects of the country’s inflationary spiral is the rapid and sustained increase in gas prices.
Rising gas prices, like rising grocery and food prices, are a sign of the times. As the Federal Reserve continues down a path of manipulated, fiat currency and no gold standard, consumers can only expect to see rising prices at the checkout lines and gasoline pumps.
As of Wednesday, U.S. gasoline prices averaged $3.52 a gallon. These prices, the highest in more than two years, are only expected to rise...
The state hardest hit by the rising oil prices is also America’s poorest — Mississippi — where, according to new data from the Oil Price Information Service, families spend the highest portion of their income on gas, as gas prices have increased every day except one since mid-February. Texas has also been hit especially hard, as gas prices there have skyrocketed by an average of 12 cents per gallon this week and 50 cents since January 1. The average price of regular gasoline at the pump climbed 14 cents to $3.51 a gallon in the week ended March 6, according to AAA, the nation’s largest motoring organization. That followed a gain of 20 cents in the prior period, which was the biggest one-week jump since the aftermath of Hurricane Katrina in 2005.
Imports increased 5.2 percent in January, the most since March 1993, reflecting a gain in oil prices and purchases of business equipment and consumer goods. Exports of American-made goods rose 2.7 percent, helped by the weaker dollar and growing economies in Asia and Latin America.
Ludwig Von Mises Institute economist Sterling T. Terrell has identified the role of inflation in the rise of gas prices, which has occurred intermittently on its current scale and scope since 2008, when the economy crashed:
The result of the Federal Reserve printing too much money is a loss of purchasing power of the dollar: something that cost $1.00 in 1950 would cost about $8.78 today. As for gas prices, in 1950 the price of gas was approximately 30 cents per gallon. Adjusted for inflation, a gallon of gas today should cost right at $2.64, assuming taxes are the same.While some officials fear the rising price of gasoline could blunt the U.S. recovery, bolstering the case for continued central bank stimulus to the economy, others say the price of oil is a warning beacon for inflationary pressures, which they argue may already be building thanks to the Fed's $600 billion bond-buying program, which has been clearly identified as a cause of continuing inflation, which is driving up oil prices. Still, the Federal Reserve remains unconvinced that they are the source of America’s economic problems, as indicated by this comment of Atlanta Federal Reserve Chairman Dennis Lockhart: “The best course of action is to play out the program as originally planned.... I don't think the situation yet exists that would justify cutting the program off or reducing it."
But taxes have not stayed the same. The tax per gallon of gas in 1950 was roughly 1.5% of the price. Today, federal, state, and local taxes account for approximately 20% of gas's posted price. Taking inflation and the increase in taxes into account (assuming no change in supply or demand), the same gallon of gas that cost 30 cents in 1950 should today cost about $3.13.
Fed Chairman Ben Bernanke himself has also indicated that he intends to do nothing to stem the tide of inflationary policies, such as the bond-buying program, that continues to drive up gasoline prices...
While the Obama administration’s energy policies undoubtedly are contributing to the rising gas prices, the inflationary policies of the Federal Reserve nonetheless occupy a significant role in the continuing rapid increase in grocery and gasoline prices...MORE...LINK